Correlation Between T Rex and ProShares Trust

Can any of the company-specific risk be diversified away by investing in both T Rex and ProShares Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining T Rex and ProShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T Rex 2X Inverse and ProShares Trust, you can compare the effects of market volatilities on T Rex and ProShares Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in T Rex with a short position of ProShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and ProShares Trust.

Diversification Opportunities for T Rex and ProShares Trust

0.03

Correlation Coefficient

T Rex  ProShares Trust

Significant diversification

The 3 months correlation between ETQ and ProShares is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Inverse and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and T Rex is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on T Rex 2X Inverse are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of T Rex i.e., T Rex and ProShares Trust go up and down completely randomly.

Pair Corralation between T Rex and ProShares Trust

Considering the 90-day investment horizon T Rex 2X Inverse is expected to under-perform the ProShares Trust. In addition to that, T Rex is 2.36 times more volatile than ProShares Trust. It trades about -0.28 of its total potential returns per unit of risk. ProShares Trust is currently generating about 0.17 per unit of volatility. If you would invest  4,780  in ProShares Trust on September 5, 2024 and sell it today you would earn a total of  2,416  from holding ProShares Trust or generate 50.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	43.75%
Values	Daily Returns

T Rex 2X Inverse  vs.  ProShares Trust

T Rex 2X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rex 2X Inverse has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

ProShares Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, ProShares Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Rex and ProShares Trust

The main advantage of trading using opposite T Rex and ProShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex position performs unexpectedly, ProShares Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ProShares Trust will offset losses from the drop in ProShares Trust's long position.

The idea behind T Rex 2X Inverse and ProShares Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.